The Arizona Constitution’s “Gift Clause” — which says that “Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation…” — represents the strongest prohibition on government aid to private enterprise ever written.

As of late, the economic climate has gotten significantly more risky for starting a business.

On February 12th, the city of Glendale hosted the Super Bowl at State Farm Stadium for the 3rd time. The stadium, built in 2006 for the Arizona Cardinals to the tune of $455 million, 69 percent was publicly funded, stands as a testament to the importance of sports to the city’s economy.

On March 1st, Arizona’s schools may have to contend with severe budget cuts. An article of Arizona’s constitution widely known as the Aggregate Expenditure Limit (AEL) is set to come into full effect, and risks subjecting K–12 education to a 17% cut in spending if the state government does not pass an exemption.

With the 2022 election in the rear-view mirror, Arizona now has a democratic governor for the first time in over a decade. While our previous research note focused on Hobbs’ tax cuts, her child tax credit is likely to have the greatest impact on Arizona’s economy and society at large.

In 2021, Arizona passed a budget that dramatically reworked Arizona’s tax policies. To name but a few changes, it aimed to increase the state’s budget surplus by $4 billion by 2025 and protect Arizona small businesses from a 78% tax hike. Most notably, it also aimed to flatten Arizona's state income tax from four brackets with a maximum rate of 4.5% to a single rate of 2.5% regardless of income.

With the 2022 election finally over, we now have a clear idea of the political headwinds in Arizona going into 2023 and beyond. With the election of Katie Hobbs as governor, Arizonans have chosen a democrat for the office for the first time in over a decade. Although the state legislature remains in Republican hands, their slim majority and bipartisan members will likely allow a significant amount of Hobbs’ agenda to pass into law.

The minimum wage in the US is at a stand-still. The Federal minimum wage, which as of October 2022 stands at $7.25 an hour, has not increased since 2009 and its real value is the lowest it has been in 66 years.

As noted in our last article, Arizona’s water usage is unsustainable. Cuts from the Colorado River and lower levels of rainfall and snowpack due to climate change are forcing Arizona residents and businesses to cut back on water use. However, as 72% of Arizona’s water is used by agriculture, these cuts are largely inefficient and insufficient to meet the state’s growing water crisis. However, there is also another side of water use that needs to be addressed if cuts must be made: groundwater.

Arizona’s water use is unsustainable. Wells have gone dry across rural Arizona, supplies from the Colorado River are slowing to a trickle, and voluntary cuts are turning into permanent reductions. In January, Scottsdale asked its residents to voluntarily cut their water use by 5%.